The increase in the cost of raw materials during the first four months of this year has represented a great challenge for the entire animal feed industry. This collaboration will not talk about the effects that this has caused to the animal production sector and as a consequence of human feeding, but specifically to the petfood industry.
With the start of the Covid 19 pandemic in China and its coincidence with the occurrence of sanitary problems in the pig herd in that country, during the first months of 2020, there was a decrease in the production of pork and its derivatives in that country. Subsequently, with the pandemic already installed worldwide, outbreaks of Covid 19 emerged in meat packers both in Europe, specifically in Germany and in the United States, which led to the temporary closure of several of these businesses with the subsequent generation of shortages of flours and fats of animal origin that immediately caused an increase in their costs.
Somehow this problem carried with it a hope of a medium-term solution, at least to the reopening of the meatpacking businesses and their subsequent regulation of the volumes of meat and fat produced. This solution was not achieved since during this year there is a consistent increase in the price of soybean paste that, far from regulating prices downward, has kept them expensive. In conclusion, as of today all the prices of raw materials that provide protein of both animal and vegetable origin remain at very high prices.
Regarding grains, the news is not encouraging either; began a very aggressive upward race since the last four months of last year due to the mixture of many factors, among them the strong market demand, the low expectations of sowing and harvesting and the climatic problems experienced in the producing areas of these ingredients such as The United States, where it was very cold, and Brazil, where droughts occurred. Another factor that contributes to the upward situation is the recovery of the Chinese pig herd that has pushed this country to increase its demand for grains.
In the end, there are very high ingredient costs in both grain sources and vegetable and animal protein sources, which has led to a consistent increase in the price of pet foods that are offered in the market.
The increases observed in the petfood category in the Mexican market during 2021 have been on average between 15 and 20 percent to the final buyer. At the time of writing this document, we do not know for certain what the response will be in terms of market demand to these increases. According to data observed throughout 2020, market consumption trends, at least in this country, pointed to a greater demand for cheaper products; however, the petfood market continued to grow from previous years.
2021 is on its way and the only thing left for us is to continue carrying out commercial strategies, formulation and optimisation of operating costs to make our petfood businesses more viable in this difficult environment.